Market Update – 6th September 2023.

6th September 2023

More stimulus measures, and promises of, have also been rapidly firing from China this week. On Monday, reports revealed that China has come up with ways to boost the domestic stock market and support the property sector.

One of China’s largest property developers Country Garden was permitted by creditors to extend payments over three years for a private bond, allowing it to avoid default and preventing unnecessary noise in the property sector market.

Policymakers are keen to boost demand and have encouraged lenders to cut interest rates to dampen the cost of owning property. Whilst markets initially reacted positively to the news of fresh stimulus, momentum faded on Tuesday following the latest services PMI report. The Caixin Service PMI slipped to 51.8 in August 2023 from 54.1 in July, missing market forecasts of 53.6. Whilst investors were somewhat disappointed by the latest figure, the services sector continues to demonstrate expansion (above 50 threshold).

In other news, oil prices surged after Saudi Arabia and Russia extended voluntary production cuts until the end of the year in an attempt to tighten markets and keep prices elevated. Brent crude hit a high of $91.15 a barrel during the trading session, its highest price since November 2022, before settling slightly lower. The action raised concerns about the potential for additional inflationary pressures on the global economy.

Meanwhile, Eurozone composite PMI slipped for the fourth straight month to 46.7 in August 2023, down from 48.6 in July, below consensus estimates and the flash reading of 47.0. The ECB is set to meet next week on the 14th of September, as rates currently stand at 3.75% policymakers will be assessing the latest data which is showing signs of deteriorating economic growth. The market has not settled on how far the central bank will move, with policymakers flitting between hawkish and dovish commentary.

We will continue to take advantages of market distortions whereby we feel factors are mispriced.

This weekend marks the start of the G20 meeting between some of the world’s most influential leaders in India. The theme for this year is sustainable development, although it is expected that delegates will not be able to avoid the topic of the Russia-Ukraine war that has been hanging like a spectre over Europe since February 2022. In addition to such topics, Joe Biden in particular has stated he will talk to individual representatives about how to resolve issues around climate change as well as what the G20 can do to fight global poverty.

Still to come this week, US services PMI, balance of trade, initial jobless claims, Chinese balance of trade and Japan’s GDP data.

Kate Mimnagh, Portfolio Economist